9 tips from a financial adviser to family and friends

25 Aug 2015

6 min read

If you’re a financial planner, and a friend or family member asks for financial tips, what do you tell them? What are the crucial nuggets of advice you’d want them to act on, to make sure they’re setting themselves up financially, and not leaving themselves open to hardship?

We asked Westpac Senior Financial Planner Diana Saad.

When Diana Saad’s at a family barbecue, or a dinner party with friends, the talk often turns to financial advice topics, like superannuation. “Super tends to be a really big mystery to a lot of people and it’s one of the aspects of financial planning that gets a lot of focus,” says Diana. “It’s because almost everyone has to have super; and most employers have to pay you super. There’s a lot in the media about super, so people tend to have a basic idea, but they want to understand it better.”

Investing is another hot topic. “Everyone knows about investment markets, we hear about it in the news. A lot of people own shares, a lot of employees get issued shares. So if I’m at a social event, there are also a lot of people who just want hot investment tips, which is something I steer away from.”

Instead, when she’s with friends talking about her line of work, she tries to reinforce some of the lesser-known financial essentials, the things we don’t talk about but should. As a 30 year old, with a lot of friends around her age, there are three key points Diana tries to drive home.

Life insurance is the top priority on Diana’s agenda. Though a lot of the time, her advice goes over her friends’ heads.

“You need to bring the idea to life, and put it in the context of an actual client’s story, and what happened in their family situation,” says Diana. “I might talk generally about the situation of how a client and their partner/spouse/child had to take time off work, how they had to fork out for medical bills, how emotionally and physically distressing it was. I talk about how difficult that would have been, if the client didn’t have the financials to back it up.”

Only then do people realise lack of insurance can be a lot more serious and devastating than they thought.

Diana finds that a lot of her friends also don’t understand how life insurance works. “They think life insurance is for when you pass away, but obviously there are different covers that fall under the category of life insurance. People still don’t know about trauma, they don’t know about income protection, they don’t realise they’re an option in the first place.”

#2 tip for friends
Estate planning – you don’t talk about it, but you should

Another financial planning topic that doesn’t get enough attention is estate planning.

“You don’t hear much about it in the media, there’s not that much conversation taking place. Especially if you’re young, you think you’re invincible. And sure, statistically you don’t get many 30 year olds passing away, but it still happens. Or you lose your capacity to work, you have accidents, serious illnesses, you can’t act for yourself. That’s when things like powers of attorney become really important,” Diana says.

#3 tip for friends
Use your disposable income wisely

With Diana’s friends being around the 30 mark, she tries to reinforce with them how good they’ve got it at the moment.

“If they’re still living at home, not paying rent, don’t have kids, I say look, you’ve probably got a lot of disposable income, you should make the most of it. Think about using this to invest, or think about how to utilise this extra disposable income for your long-term financial success.

“You’re not always going to have that much extra money to set aside through your different life stages,” she says. “You might be unemployed for a bit, you might have to stay home if you have kids. If you do have children that’s an extra ongoing expense. If you move out you’ll pay rent or pay off a home loan. So you should make the most of the situation now because you might not always have it this good.”

When it comes to her parents, her parents’ friends, her friends’ parents, she has a different list of priorities she likes to reinforce.

#1 tip for parents’ generation
Think Centrelink

“There’s a lot of planning that can be done to maximise Centrelink benefits. I tell people in their 50s and 60s they should make sure they get the right advice on structuring their financial affairs so they can meet their retirement goals but at the same time, maximise the Centrelink benefits where they are potentially eligible – whether for full or partial benefits.”

#2 tip for parents’ generation
Get your estate planning in order

Though a lot of Diana’s friends have an amicable family environment, she still asks them what would happen if someone passed away.

“Your family’s going to be distraught emotionally, so the last thing you want is for them to be constantly going to court because there’s no will and the court has to decide who’s going to administer the estate, who’s going to be the beneficiaries.

There are set rules which come into play if someone dies intestate (without a will), and you don’t really have any control over who the money goes to or where it goes to or how to tax effectively structure the distribution. So all that power is lost.”

#3 tip for parents’ generation
Force yourself to tackle aged care

When Diana’s talking to people of her parents’ generation, and they have health issues, she might also bring up planning for aged care.

“A lot of these aged care facilities that are being built have really expensive bonds,” she says. “This is something people don’t think about - until they get to that stage in their life and find out it’s a massive rigmarole.”

Let’s not forget the Generation Z representatives at Diana’s barbecues and family get togethers. What does she tell her nieces, nephews and friends’ kids?

#1 tip for the younger generation
Only buy what you can afford

Live within your means, is her absolute top tip for the younger generation. “People are so consumed by expenditure. Don’t get me wrong, I love to go out and buy nice shoes, but debt’s becoming a serious problem: that whole instant gratification thing. People want everything now. And they’re willing to max out their credit cards to do so.”

The outtake: if you want to enhance your lifestyle, increase your means first.

#2 tip for the younger generation
Save like a demon

It’s an oldie but a goodie that holds true for every generation – learn the discipline of saving. It’s something Diana’s mum instilled in her early on.

“When I was a kid mum said you have to save at least 10 per cent of whatever you make. She said you save that money first and treat it like it’s dead money, like you don’t have it. And then whatever’s left over you can do whatever you want with it. Enjoy yourself, go out, go shopping. Whereas if you go out and spend that money and you save whatever’s left, there’ll never be anything left.”

#3 tip for the younger generation
Set some goals

Whether it’s an overseas trip, buying your first car or saving a deposit for your first home, they’re all great incentives for putting away some of your hard-earned cash when you’re young.

So they’re the topline tips you’d be getting if you were in Diana’s circle of family and friends. In social situations though, Diana’s careful to talk in general concepts only, without giving specific details or information. “I try to leave question marks in their heads for them to explore further.”

The information shown on this site is general information only, it does not constitute any recommendation or advice; it has been prepared without taking into account your personal objectives, financial situation or needs and you should consider its appropriateness with regard to these factors before acting on it. Any taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. You should also consider obtaining personalised advice from a professional financial adviser before making any financial decisions in relation to the matters discussed hereto.